Key Takeaways
- • The Netherlands and Denmark retained the top two positions in Mercer and CFA Institute's 2020 Global Pension Index, the world's most-cited benchmark of pension system quality, which assesses nearly 40 countries representing about two-thirds of the world's population on adequacy, integrity and sustainability.
- • The Netherlands has held the top spot since 2018, when it displaced Denmark, and its pension assets total roughly €1,500 billion according to Mercer's Marc Heemskerk.
- • Dutch retirees can expect on average 75% to 80% of their last earned income in pension, with the state pension available to every citizen and occupational pension participation compulsory for employees.
- • The Netherlands' planned Pensioenakkoord reform, targeted for 1 January 2022, is designed to keep the system at the forefront and build confidence, per Mercer.
- • Israel, a new entrant to the benchmark, moved ahead of Australia into fourth place, with Finland rounding out the top five ahead of Norway and Sweden.
Summary
The Dutch and Danish pension systems have retained their positions as the world's best, according to the annual Global Pension Index compiled by consulting firm Mercer in collaboration with the CFA Institute. The index assesses the systems of nearly 40 countries, representing around two-thirds of the world's population, on adequacy, integrity and sustainability.
The Netherlands has led the index since 2018, when it displaced Denmark. Marc Heemskerk, a pension expert in Mercer's Dutch team, attributes the country's ranking to several factors. The system is sustainable, supported by pension assets of roughly €1,500 billion. Retirees can typically expect a pension income of 75% to 80% of their last earned income, a level he noted is significantly higher than in many other countries. Building a pension is compulsory for employees and facilitated by employers, which explains the size of the domestic sector, and the state pension is available to every Dutch citizen at a relatively high level.
José Meijer, interim chair of the Federation of Dutch Pension Funds (Pensioenfederatie), credited the country's continuous focus on improvement. This has culminated in the Pensioenakkoord, one of the largest reforms ever in the Dutch pension sector. Scheduled to take effect on 1 January 2022, it will introduce a suite of sweeping measures. Heemskerk acknowledged that reforming a top-ranked system may seem counterintuitive, but said it is "a necessary step to remain at the forefront and build confidence in the pension system."
Denmark's pension industry expressed satisfaction with its score while acknowledging it had hoped to regain first place. Karina Ransby, deputy director of Insurance & Pension Denmark (IPD), said the country had advanced on several parameters, but the Netherlands also improved in several areas. She described the national system as "world-class" and said the sector is constantly working to improve it.
In the broader rankings, Israel, which joined the Mercer and CFA Institute benchmark this year, scored highly on both the adequacy and integrity pillars and displaced Australia from third to fourth place. Finland ranks fifth, ahead of Norway and Sweden.
The Netherlands has led the index since 2018, when it displaced Denmark. Marc Heemskerk, a pension expert in Mercer's Dutch team, attributes the country's ranking to several factors. The system is sustainable, supported by pension assets of roughly €1,500 billion. Retirees can typically expect a pension income of 75% to 80% of their last earned income, a level he noted is significantly higher than in many other countries. Building a pension is compulsory for employees and facilitated by employers, which explains the size of the domestic sector, and the state pension is available to every Dutch citizen at a relatively high level.
José Meijer, interim chair of the Federation of Dutch Pension Funds (Pensioenfederatie), credited the country's continuous focus on improvement. This has culminated in the Pensioenakkoord, one of the largest reforms ever in the Dutch pension sector. Scheduled to take effect on 1 January 2022, it will introduce a suite of sweeping measures. Heemskerk acknowledged that reforming a top-ranked system may seem counterintuitive, but said it is "a necessary step to remain at the forefront and build confidence in the pension system."
Denmark's pension industry expressed satisfaction with its score while acknowledging it had hoped to regain first place. Karina Ransby, deputy director of Insurance & Pension Denmark (IPD), said the country had advanced on several parameters, but the Netherlands also improved in several areas. She described the national system as "world-class" and said the sector is constantly working to improve it.
In the broader rankings, Israel, which joined the Mercer and CFA Institute benchmark this year, scored highly on both the adequacy and integrity pillars and displaced Australia from third to fourth place. Finland ranks fifth, ahead of Norway and Sweden.
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